Study Identifies HR Contributions to Shareholder Value

April 25, 2006

Performance management, rewards, succession planning, recruiting, communications, HR technology and the overall HR function can significantly contribute to shareholder value if companies design and implement their programs in a formalized way, according to a new study by Watson Wyatt and the Human Resource Planning Society. The recently completed study was introduced at the 2006 Human Resource Planning Society Annual Global Conference, taking place April 23-26 in Tucson, Arizona.

Watson and HRPS surveyed 50 companies in the Fortune 1,000 that averaged $3.5 billion in annual revenue and employed more than 6,000 people. In each area, the study identified practices that were linked to high employee engagement, financial performance and effectiveness.

For instance, rewards programs that add the most to a company’s market premium are targeted at high-potential employees, aligned with business goals and integrated with talent management. Value is added in performance management by avoiding a pre-set distribution of performance ratings. In recruiting, employee engagement and effectiveness is enhanced, and the bottom line bolstered, when companies explain to a new employee why he or she was hired. Doing so serves to reinforce values and expectations.

The study highlights "the need to be pretty deliberate about how you spend your time and money on program design and implementation," says Ilene Gochman, national practice leader in organization effectiveness for Watson Wyatt and the study’s author. "They do make a difference."